1. Rack up retirement savings
If you're a small business owner, you have access to several tax-advantaged retirement savings options. One being a Solo 401(k), often referred to as a "single-participant 401(k) plan." This plan allows you to save up to 100% of your income as an employee. That's up to the current annual limit of $20,500 if you're under age 50, or $27,000 if you're 50 or older. As the employer, you can contribute up to 25% of your wage.
In 2022, that meant you could contribute a total of up to $61,000. That's $61,000 you didnt have to pay taxes on until you make withdrawals in retirement.
While we're on the subject of retirement savings, you also have the opportunity to contribute to traditional and Roth IRAs.
2. Deduct your vehicle
If the nature of your business means you need to drive as part of your job, you can take either the standard mileage rate deduction or the actual expenses deduction. It means keeping careful records throughout the year but it can pay off.
If you do a great deal of driving for your business, consider buying a company vehicle. That way, you may deduct the entire cost of ownership and operation, subject to limits.
3. Donate to charity
Consider donating business assets to charity and documenting/taking the deduction. It will make you feel good and save money on taxes which feels great as well.
4. Keep track of the cost of doing business
As a business owner, you're responsible for keeping things up and running. Many of those expenses can be deducted at tax time, including:
Rent
Utility costs
Equipment
Materials
Supplies
Business related meals
Employee salaries
Subscriptions to business publications
Domain and web hosting
Marketing
Independent contractors
Bad debt
Legal fees
Travel fees
Bookkeeper fees
Accountant fees
Tax consultant fees (Yes, working with me is tax deductible!)
5. Take advantage of the home office deduction
If your business involves working from home, the home office deduction can be a lifesaver. As long as you regularly use a specific portion of your home exclusively for business, nearly everything, from a portion of the interest paid on the property to utilities, is deductible.
For a list of 200+ deductions, get your Tax-Free Living E-book here
6. Cover your health insurance
Paying your own health insurance premium may lower your taxes. If you can't receive health insurance coverage through a spouse or domestic partner, you may be able to deduct all or part of your insurance premiums, lowering your tax bill. This amazing deal extends to dental, vision, and even long-term care insurance premiums. Better yet, you can claim the deduction for your spouse and qualifying dependents age 26 or younger by the end of this year.
7. Create a health savings account
Contributions to a health savings account are tax-free, allowed to grow tax-free, and can reduce both taxes and future health costs.
8. Dont forget depreciation
As business assets age, their value depreciates. Take advantage of the ability to offset a portion of your income equivalent to the amount assets have depreciated. Because of the different rules associated with claiming this deduction, the subject can be tricky to navigate. This is where a great tax advisor is worth their weight in gold.
9. Financing costs
If you're paying interest and fees on money borrowed to start or grow the business, the IRS allows you to deduct most of it.
Owning a business involves a learning curve and shelling out a whole lot of cash. Thanks to IRS rules, though, you can recoup some of that money at tax time.Â
CONCLUSION:
Many of your everyday operating expenses are tax deductible.
Saving for your future may put extra money in your pocket today.
A tax consultant can be your best friend when it's time to gather deductions!! Contact Accountable Financial if youre in need of a tax consultant today